Letellier v. Small

• Decision Date: 19 April 1979
• Citation: 400 A.2d 371
• Parties: Gerard G. LETELLIER and Priscilla Letellier v. Frederick J. SMALL.
• Court: Maine Supreme Court

Page 371

400 A.2d 371

Gerard G. LETELLIER and Priscilla Letellier v. Frederick J. SMALL.

Supreme Judicial Court of Maine.

April 19, 1979.

Caron, Ayotte & Caron by Edward L. Caron, Jr. (orally), Saco, for plaintiffs.

Waterhouse, Carroll & Cyr by Robert N. Cyr (orally), Peter L. Edmands, Biddeford, for defendant.

Before McKUSICK, C. J., and POMEROY, ARCHIBALD, DELAHANTY, GODFREY and NICHOLS, JJ.

McKUSICK, Chief Justice.

Defendant-vendor Frederick J. Small appeals from a jury verdict awarding plaintiffs-vendees Gerard and Priscilla Letellier $9,500 in damages for deceit in his sale of real estate to them. The core of the Letelliers' complaint is that Small fraudulently misrepresented the results of a soil test in order to prevent them from learning that no subsurface sewage system could be installed on the land they purchased from Small. Small rests his appeal on two grounds. First, he argues that the evidence was insufficient to support the jury's finding that the plaintiffs made reasonable efforts to determine the truth or falsity of his representation regarding the soil report. And, second, he contends that the presiding justice erred in rejecting certain instructions that he proposed.

We deny the appeal.

In October 1976 the Letelliers purchased from Small a parcel of undeveloped land known as "lot 8" located in Biddeford. In 1974 Small had sought approval of the lot along with others as a subdivision from the Biddeford Planning Commission. After receiving the results of a soil analysis test, the Biddeford Planning Commission imposed two restrictions on lot 8; namely, that the lot had to be serviced by the municipal water system and that no subsurface sewage disposal system would be permitted. The commission entered these restrictions upon a subdivision plan which included lot 8, and Small's attorney filed that plan with the Registry of Deeds in York County.

It is uncontroverted that the Letelliers did not know of the restriction prohibiting use of a subsurface sewage system on lot 8 until after the purchase. However, the parties presented conflicting evidence as to whether defendant Small (1) knew of the restrictions prior to plaintiffs' purchase of the lot and (2) intentionally or recklessly misled plaintiffs by indicating that the lot had passed the soil test.

As to the first factual issue, plaintiffs established that defendant at times had in his possession the soil report and a copy of the subdivision plan including the restrictions. Small denies having obtained knowledge of the restrictions prior to the sale of the land, either through his attorney or from his own examination of the subdivision plan or the soil report.

As to the second factual issue, plaintiffs testified that (a) they asked Small whether the lot passed the soil test and defendant replied, "Yes, it has"; (b) defendant offered to show plaintiffs a copy of the soil analysis, but later said that he was unable to find the report; and (c) defendant showed plaintiffs a copy of the subdivision plan that did not include the restrictions. Small admitted that he could not find the soil report and that he showed plaintiffs a copy of the subdivision plan that did not contain the restrictions. However, defendant testified that he also showed plaintiffs a copy of the subdivision plan that did include the restrictions and that in answering plaintiffs' question regarding the soil report, he had replied, "I must have done something right. I can sell a piece of land." While admitting this response was ambiguous, defendant argues that plaintiffs could not have justifiably relied upon it.

Upon learning of the proscription against a subsurface sewage system, plaintiffs abandoned their plans to build a house on lot 8 and brought the instant suit seeking damages for fraud and deceit. Defendant now appeals from the jury's verdict in favor of the plaintiffs.

The presiding justice's instruction setting forth the elements of the tort of fraud or deceit tracked the language of Crossman v. Bacon & Robinson Co., 119 Me. 105, 109 A. 487 (1920). In Crossman the Law Court held that in an action for fraud or deceit, a plaintiff must establish the following elements:

" '(1) a material representation which is (2) false and (3) known to be false, or made recklessly as an assertion of fact without knowledge of its truth or falsity and (4) made with the intention that it shall be acted upon and (5) acted upon with damage.' " Id. at 109, 109 A. at 489.

In addition, the court stated that a plaintiff must show that he

"(6) relied upon the representations (7) was induced to act upon them and (8) did not know them to be false, and By the exercise of reasonable care could not have ascertained their falsity." (Emphasis added) Id. at 109, 109 A. at 489.

Defendant maintains that the evidence was insufficient to support the jury's finding that the plaintiffs made reasonable efforts to investigate the truth or falsity of defendant's representation regarding the soil report.

Before evaluating the specifics of defendant's argument, however, it is necessary to consider whether the eighth element of fraud set forth in Crossman nearly 60 years ago has continued validity. In Maine case law, there are two conflicting lines of authority on the question whether the victim of a fraudulent misrepresentation, in order to recover, must establish that he made reasonable efforts to ascertain the truth or falsity of the representation. The rule advanced in Crossman is traceable to an 1851 decision in which the Law Court stated that it would not intervene to aid a plaintiff who "had the full means of detecting the fraud and ascertaining the truth, and neglected to inform himself of it, when he might easily have done so . . . ." Pratt v. Philbrook, 33 Me. 3, 23 (1851). The Law Court affirmed the plaintiff's duty to investigate the representations of a defendant in two subsequent nineteenth century cases, Bourn v. Davis, 76 Me. 223 (1884) (vendor's misrepresentation regarding value of land not actionable where vendee could have determined true appraisal by consulting public records), and Palmer v. Bell, 85 Me. 352, 27 A. 250 (1893) (vendor's misrepresentation that there was no "trouble" regarding a right of way over land sold to vendee not actionable where vendee could have ascertained truth or falsity of representation by contacting owner of the easement).

The second line of authority emerged in Eastern Trust & Banking Co. v. Cunningham, 103 Me. 455, 70 A. 17 (1908). In Cunningham a plaintiff-payee-bank based its action for deceit on the defendant-drawer's implied misrepresentation that there were sufficient funds in a drawee bank to pay the check drawn to the order of the payee. In rejecting the drawer's argument that the negligence of the officers of the payee bank in failing to discover the drawer's misrepresentation should bar recovery for deceit, the Law Court stated:

"There are cases which hold that where one carelessly relies upon a pretense of inherent absurdity and incredibility, upon mere idle talk, or upon a device so shadowy as not to be capable of imposing upon any one, he must bear his misfortune, if injured. He must not shut his eyes to what is palpably before him. But that doctrine, if sound, is not applicable here. We think the well settled rule to be applied here is that if one intentionally misrepresents to another facts particularly within his own knowledge, with an intent that the other shall act upon them, and he does so act, he cannot afterwards excuse himself by saying 'You were foolish to believe me.' It does not lie in his mouth to say that the one trusting him was negligent." Id. at 465-66, 70 A. at 22.

Following Cunningham, the conflicting and mutually exclusive lines of authority regarding the plaintiff's duty to investigate coexisted. The Cunningham rule that the plaintiff's failure to exercise reasonable care to ascertain the truth or falsity of the defendant's representation poses no bar to recovery was reaffirmed in Harlow v. Perry, 113 Me. 239, 93 A. 544 (1915) (buyer's negligence in failing to examine goods purchased does not excuse seller's misrepresentation that all goods were of like quality), and Bixler v. Wright, 116 Me. 133, 100 A. 467 (1917) (buyer's failure to read contract no bar to asserting seller's fraudulent misrepresentation as defense in action for breach of contract). During the same period, Clark v. Morrill, 128 Me. 79, 145 A. 744 (1929) (no recovery for seller's alleged misrepresentation of value of business where buyer could have ascertained value through independent inquiry), and Coffin v. Dodge, 146 Me. 3, 76 A.2d 541 (1950) (no recovery for deceit where buyer could have determined falsity of dealer's representation that a second dealer could not deliver truck on time by checking the information with the second dealer), echoed the "caveat emptor" theme of the nineteenth century cases.

The 1953 case of Pelkey v. Norton, 149 Me. 247, 99 A.2d 918 (1953), attempted to reconcile those conflicting lines of authority. Pelkey involved an allegation by a car dealer that a customer had fraudulently misrepresented the model year of a truck on trade-in. The customer argued that the dealer's negligence in failing to determine the model year of the truck from its serial and engine numbers excused the alleged misrepresentation. In rejecting this contention, the court acknowledged that the eighth element of the tort of deceit as set forth in Crossman v. Bacon & Robinson Co., supra, imposed a duty on a plaintiff to exercise reasonable care to ascertain the truth or falsity of a defendant's representation. However, the court identified two classes of fraud, actual and constructive, "distinguished by the presence or absence of an intent to deceive," Id. at 251, 99 A.2d at 920, and held that Eastern Trust & Banking Co. v. Cunningham, supra; Harlow v. Perry, supra; and Bixler v. Wright, supra, created an exception to the plaintiff's duty to...